Founder of cryptocurrency firm Terraform Labs sentenced to prison in Montenegro for forgery

A court in Montenegro on Monday sentenced the founder of cryptocurrency firm Terraform Labs, Do Kwon, and another citizen of South Korea to four months in prison for using forged documents.

Kwon was arrested in Montenegro in March on an international arrest warrant in connection with the $40 billion crash of Terraform Labs’ cryptocurrency, which devastated retail investors around the world.

Both South Korea and the United States have requested his extradition from Montenegro. The courts in the country are yet to decide on those requests in separate proceedings.

Authorities said Kwon and the other man were arrested at Podgorica Airport while trying to fly to Dubai using fake Costa Rican passports.

The Basic Court in Podgorica, Montenegro’s capital, said on Monday that time already spent in detention since the pair’s arrest on March 23 will be included in the sentence, state RTCG television reported.

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“The court found they were guilty of the criminal act of forging identification documents,” said Kwon’s lawyer in Podgorica, Goran Rodic.

Rodic said he is yet to consult with his clients about further steps and a possible appeal.

South Korea asked Interpol in September to circulate a “red notice” asking the agency’s 195 member nations to find and apprehend Kwon.

The two are believed to have hidden in Serbia but moved to Montenegro after South Korean investigators tracked their whereabouts and asked Serbian authorities to detain them, the South Korean Justice Ministry said when the arrests were made.

Kwon and five others connected to Terraform are wanted on allegations of fraud and financial crimes in relation to the implosion of the firm’s digital currencies in May 2022.

TerraUSD was designed as a “stablecoin,” a currency that is pegged to stable assets like the U.S. dollar to prevent drastic fluctuations in prices. However, around $40 billion in market value was erased for the holders of TerraUSD and its floating sister currency, Luna, after it plunged far below its $1 peg.